Your veges cost more and bills are becoming a headache, austerity is a global buzzword and we're all being urged to tighten our belts. The Sunday Star-Times toured the country to investigate the reality behind the middle-class squeeze.

US Vice-President Joe Biden called it the "catastrophe" of the American middle class. The suburban dream was over: the 2000s were, statistically, the worst-ever decade for the American middle.

They saw their income drop (by 7.1 per cent) and their numbers shrink (from 61 per cent to 51 per cent of the American population). It was a crisis that led to a presidential election where both candidates fought openly to win that middle-class vote.

It's indisputable, say economists, that the American middle class is doing it tough.

So with a recession, spiralling inner-city house prices and a rising cost of living, is the Kiwi middle-class also feeling the squeeze? You might think so, but some economists reckon the numbers tell us we've never had it so good.

Jean-Pierre Du Raad, chief executive of the New Zealand Institute of Economic Research, agrees. The middle-class squeeze is "a bit of an urban myth", he says.

Since 2001, our middle-class median income has risen by 21 per cent. Yes, the recession has hit, but it's arguable the middle class has suffered less than the poor and the rich. In part, that's because of Director's Law.

Named after the late American economist Aaron Director, it suggests the middle class will always have undue political influence because of its size and aggregate wealth.

"The middle class has political power, so the things they are concerned about are acted on," says Nolan.

"They are always trying to transfer things to themselves. They are not being selfish as individuals... we all want our lives to get better, it's just human nature."

So in New Zealand, that means political decisions that benefit the middle more than anyone else: The expansion of Working for Families tax breaks, the removal of means-tested superannuation, subsidised healthcare and interest-free student loans.

Du Raad says 40 per cent of the extra $1.5 billion invested into Working for Families went to middle-class families (a two-parent family with two children earning less than a combined $126,300 will receive Working for Families assistance) and says the 2010 tax switch, where GST rose and income tax went down, benefited the middle class by $10 to $25 a week.

Nolan also notes that a proportion of people around the 60th percentile (that's richer than 59 per cent of people, poorer than 39 per cent), who aren't paying net tax, they get more from the Government than they give - almost certainly due to Working for Families.

So where did the myth of the middle-class squeeze come from? Well, says Nolan, the middle class knows how to make a noise, everyone's feeling the recession, and many have paid attention to the noises coming from America.

Of course, this is about statistics - the average. This isn't you, living from pay cheque to pay cheque, scraping together the school donation, the football subs, the car repayment, the Sky bill, the rent for the bach this Christmas.

Department of Statistics figures show, in the past five years, substantial climbs in the cost of insurance (home insurance by 130 per cent, contents by 41 per cent and health by 43 per cent), most foods (by about a fifth), rates (30 per cent) and electricity bills (26 per cent).

But remember, says Du Raad, rising prices hit everyone, but reduced mortgage rates are more likely to help the middle class (if, crudely, you presume the rich own their homes outright and the poor rent). And house prices? That's merely young middle-class people paying more to older middle-class people.

"There is, potentially, the sense of entitlement - life is tough, and you get used to certain goods and services, and when you see your neighbours doing a bit better you think, why isn't this happening for me?" ponders Nolan.

"But the middle class has become better and better off over time - even if they haven't noticed it."

The middle class has also done relatively better than the very rich in recent years, in contrast to the US where tax breaks have taken wealth away from the middle class to the rich.

Maybe the rich aren't getting rich as quick, counters University of Auckland economist Susan St John, but for 25 years they were: in 1995, there was a factor of 15 between the average wage and the top corporate salary. Today, it's factor of 119.

"Anecdotally, we see it every time we open up the newspaper and see what is paid to the CEOs, compared to what happened in the past, and it seems completely disconnected from the value they are contributing," says St John.

She argues we have a tax system "very generous" to the rich, with a low maximum tax rate. And she points to Working for Families cutbacks, our unusual lack of an initial tax-free chunk of income, and an increased amount of compulsory student loan repayments - now at 12 per cent - being taken from wage packets, which particularly disadvantages women returning to work.

And, says St John, it's tough for the retired. The "middle 40 per cent" of retirees have a lot of uncertainty - they know they are going to live longer, but they don't know how long, so find it hard to eke out savings and these days don't have the cushion of a lucrative employer-provided pension.

What all three economists do agree on is the growing level of inequality in New Zealand - it's this chasm between our poorest and richest that's probably the real issue.

Du Raad says the squeeze has actually come strongest on low-income households earning between $30,000 and $40,000 a year.

"There are social issues we should be looking at, not a blanket claim that the middle class are struggling - it's not in the data," argues Nolan.

"We'd be better to focus our attention and efforts on people hit by the recession - the long-term unemployed; child poverty."

So if you are feeling squeezed, it may be a reflection of belt-tightening triggered by fears about the economy - and it may help to consider there's probably someone worse off than you.

"It seems strange," concludes Nolan, "to demand transfers [of wealth] to the middle-class at the same time we're demonising those unemployed during a recession and making it harder for them to get benefits."

BUREAUCRAT TURNED POSTIE

James Barton swapped his suit and tie for a postbag five years ago and never looked back.

After 33 years as a public servant, the 63-year-old quit his job at the Environment Ministry and now roams the streets of the northern Wellington suburb of Johnsonville delivering mail.

"I'm glad to get out of there," he says of the public sector. "You can do an immense amount of thinking when you're walking around the streets."

On a typical day, he might rise at 6.20am and cover 18km on foot delivering mail before knocking off for a beer at 2pm.

Barton left his job as a climate change expert, in which he helped the Government devise a way measure to carbon removal and link it to land use, just before savage job cuts began. Now he finds it depressing to walk down Lambton Quay amid the dwindling throng of suits. "Everyone looks so glum," he says.

Barton says it's a difficult time for younger public sector workers, many of whom had never endured such hard times.

While he prefers pounding the pavements, his finances are tighter. With just 20 to 25 hours work per week, his wage has roughly halved. Barton's wife Alisi works at a supermarket, but he says his costs - petrol, power, rates and insurance had risen above inflation. The couple are paying off the last of their mortgage but with Barton two years from retirement age, he says: "We realise we have to be a lot more careful and prudent."

An expensive holiday is shelved and Mr Barton is holding onto his ageing television and car.

Where he can, he picks up some consultancy work and would consider a return to the civil service for the right job, but admits: "There are not many at the moment I would go for." Until then, he's happy to keep delivering the mail: "It's good for me. I've lost 12kg."

- Ben Heather

THE OIL RIG WORKER

On the outskirts of Taranaki, where rolling farmland falls sharply into roaring ocean, the Annemans-Boyd family live a "life of extremes".

Like a growing number of workers in the resource-rich province, father Jurgen Annemans is employed in the oil industry, spending half his time on rigs out at sea.

"Sometimes it's hard and you think ‘why am I doing it,' " says wife Kristie Boyd, who stays at home with children Lucia, 5, and Zoe, 2. "But it does mean we get to have a pretty great lifestyle."

Jurgen has been working as a chef on the "rigs" four-and-a-half years. "He couldn't really get much further as a chef in Taranaki and he was sick of it, burnt out," says Kristie. "And I wanted to stay at home with the children and be a homemaker because that's the kind of family I was part of."

At first, Jurgen worked two weeks on, and two off. Now it's three and three. "It is hard. Everybody struggles with relationships," Kristie says. "When he's not here, I don't get much respite and when he is here there's a lot of free time."

The financial implications are also challenging: Jurgen is paid every six weeks, so budgeting can be tough. But Kristie feels privileged to stay home with the children and to own property. Earlier this year, the couple bought a lifestyle block at Onaero, 20 minutes from New Plymouth, going halves with Kristie's parents.

Jurgen's improved income has made things easier, but it comes with a catch. Kristie wonders about the environmental impact of the oil companies, and if it's right to take their money. "But then I think, ‘this province is really thriving'. There's still a lot of hardship, but there are also some awesome things happening because of the flow of money into the region."

Kristie says the situation won't necessarily be forever - there are more family-friendly onshore opportunities in the oil industry. "When you have a family you've got to put other things before money. Otherwise it just has more and more power over you."

- Kirsty Johnston

THE FIRST-HOME BUYER

Crunch time came at a heated house auction in Auckland. First-home buyers Christie, 33, and Marc Sammons, 36, watched as competing bidders pushed the price of their ideal home $60,000 above their half-million dollar ceiling.

"A lot of the houses go for mega high prices, which makes you nervous," Christie says. "Things were quite fevered at auctions."

The couple began house-hunting in 2007 but found prices too high. They returned to the fray early last year, and with careful budgeting saved a 10 per cent deposit. "We didn't want to change our lifestyle too much, so we kept track of our spending for a few months, including a few trips to Australia," Christie says.

They were surprised to find the recession having little impact on prices.

"When we first started looking people were just starting to go nuts on prices. What we thought was reasonable wasn't actually a reflection of the market."

They revised their budget to ensure they could live in an area they liked and bought a two-bedroom home in One Tree Hill. "We haven't noticed a difference financially because we planned so well in advance," says Christie, "you've got to be able to do it on one income, just in case." They can still afford Australian holidays and to eat out, but say they are careful about avoiding debt, particularly on credit cards.

Despite all that, she feels buying a house is much harder now than for previous generations of first-time buyers because families now can't afford mortgages on a single income.

"If we were to have children I don't think we could permanently have one stay at home parent unless one of us had a better-paid job."

- Marika Hill

THE JOB-SEEKER

In 2009 Brian Bonniface, 59, lost the job he had loved for 13 years.

He was a product development technician at Fisher & Paykel Appliances, a company crushed by the decline in consumer spending during the global financial crisis. Chin up, he applied for 85 vacancies, but was given just five interviews. He finally got a job as calibration technician grading dirty water. He quit after six weeks because of the time he had to spend away from home.

"You felt like you were getting rejected by society: ‘you're too old, you're on the scrap heap. Why don't you hide under a rock and die,' " he says.

Brian took part-time work as a primary school caretaker and delivering newspapers and pamphlets. "It was really disheartening. Going out for a meal was out of the question, the movies were out of the question. We were lucky to have steak at all. Sky was going to get the chuck. Any slight luxuries were gone."

Five months after losing his job, Brian ran into some old colleagues who had started their own business. They agreed to take him on.

He is grateful for his new job repairing televisions and he enjoys the team of "great guys". But his salary is about $10,000 less than at Fisher & Paykel and without the superannuation and life insurance benefits. While the cost of living has exploded, he hasn't had a pay rise in three years. "The rates have gone up, car registration has gone up, food is going up. It's made a dent in the lifestyle I live."

Two years before Brian lost his job, he and his wife Hennie remortgaged their Papatoetoe home for renovations and still owe the bank around $130,000. "We can afford it now, but if one of us loses their job, we will be in trouble."

But they hid their financial struggles from their son and refused to withdraw him from private school. "It came very close to him. We were worried we weren't going to be able to offer him a good start to life."

Brian isn't bitter. He says Fisher & Paykel treated him well and had little economic choice but to move production to factories in Thailand and Mexico. But he thinks the government isn't helping keep jobs in New Zealand.

In an industry dependent on consumer spending, he's now constantly nervous he may be out of work again soon: "You always feel that the axe is hanging over your head."

- Simon Day

THE PUBLICAN

Noon, and rush hour in the picturesque village of Portobello on the Otago Peninsula. Portobello Hotel publican Tony Reid is taking a break from his 100hr-a-week labours to soak up the sunshine and the view before returning to the kitchen to cook lunch. Eight cruise ship buses head past destined for the wildlife park, but only one may stop at Reid's pub.

Reid and his wife Sarah - and their daughters, Rosa, 2, and Doreen, 12 weeks - are about to complete their first year running the pub. It has, they say, definitely improved their lifestyle - Reid was formerly a deep-sea fisherman.

"We can create our own destiny," he says. But he thinks people presume it's easier than it is.

"You've always got that ‘he's so lucky' attitude in a small town. If only if they realised the stress of it all: I work hard. We were brought up that it's a privilege to have a job. And you've got to have a go. And I get to meet awesome people everyday."

Tony says the biggest pressure comes from money: paying wages and covering the huge mortgage. They employ ten staff in the pub, and expect to take on three more in their recently-opened adjoining ice-cream parlour.

Locals are the key to the pub's survival.

"When people aren't walking in the door it's just so hard not to think ‘Oh no!'," Reid says.

"But if you don't put yourself out there and don't do things, it can only be tough. So you do something, and you create what you want to do, and it will become easier eventually."

- Wilma McCorkindale

THE RETURNING KIWI

After 17 years in London, it was time to come home. The city so appealing to Emily Swan when she'd arrived in her 20s wasn't the place she wanted to raise a child.

So in 2010 Swan, her Dutch-born partner and their daughter Belle crossed the globe to set up home in Auckland.

The clean air, the beaches, the family support - all have been just as expected. What was unexpected was that the antipodean good life would be so pricey.

"We were delighted to be home. But we've been really taken aback by how expensive it is," Emily says.

Emily, 38 works in media and her partner is in hospitality. They earn $130,000 a year between them. They have a mortgage on a two-bedroom house in central Freemans Bay, which costs them more than their London rent, (and which they bought only with help from Emily's mother).

Emily's salary is 33% lower than in the UK, but she find utilities extremely dear. "Gas, water, electricity - we pay each month what we paid for each quarter in London."

In London, broadband was free with her cellphone contract. Food was cheap: last week own-brand supermarket milk was priced 70% higher here than in the UK, and bread 50% higher. Cheaper petrol and childcare don't balance the extra costs.

Swan is paid monthly, her partner weekly, and "three out of four weeks we get down to cents in the bank before payday. "My daughter was doing swimming lessons, but we've stopped - we haven't the funds."

Belle is three, but tall for her age, and has almost outgrown a cot-bed meant to last till she was five.

"I'm thinking shit - I'm going to have to buy her a new bed. I'll have to do it on hire purchase."

Luxuries Swan had grown used to - especially dining out - are out of the question.

"Sometimes I look at my peers, and feel like poor relations. We don't measure our happiness by our things. It's very much about our child and her quality of life, and we have that. But it's not how we thought it was going to be."

Does Swan appreciate that with that income and a house, many Kiwis would see her as well-off?

"Yes! The average household income is what, $30,000? Crazy. But then a lot of people are sending their kids to school without breakfast. We are grateful for what we've got."

And yet . . . "I look at my age and think, I'm nearly 40 and I'm still living from pay-cheque to pay-cheque. What do I pass on to the next generation? Will I ever pay my mortgage off? I do feel like I've f---ed up somewhere along the way.

While she wasn't always sensible with money in the past, she had a "bloody good time", and she has the mortgage now. "I'm happy with the way round I did it."

Emily and her partner would like to have another child, but don't feel they could afford to live on one income, and "I don't feel anyone else should have to pay for that in terms of state support."

She doesn't regret leaving London. The other day she had a do in town. Two minutes after leaving she was picking up her daughter from her mum's house, and Belle was in bed 15 minutes later.

"I love that. Life here is much easier. That's worth it."

- Adam Dudding

THE LIFESTYLERS

When Richard and Rosie Hutchinson moved to New Zealand eight years ago, they never wanted to live in the city. But it's taken that long for them to make their country-living dream come true.

The English couple and their two children, aged 10 and 12, are trading in their comfortable life on Auckland's North Shore for the world of the small business owner in rural New Zealand.

The family bought the Black Dog Cafe in the tourist town of Matakana six months ago, and just a few days before Christmas will finally make the move to their new life.

"We've always wanted to do something like this," says Richard. But it hasn't been easy: taking the plunge has meant selling the family home and losing the security of two incomes after Rosie quit her job at Auckland Zoo to focus on the cafe. They've been renting houses in both Auckland and Matakana and commuting between the two.

"There are always financial concerns," says Richard, who describes his family as "reasonably OK" financially since emigrating here.

"Now we are just relying on one income and what we can get out of the cafe, if we can run it successfully, whereas before we had regular, once-a-month money coming into the bank and once that stops . . . well it's things like that we have to work our way around."

Richard says he knew there would be sacrifices to make but the decision wasn't about money, but lifestyle - although he admits the cafe has a demanding workload, especially as he has continued with his day job in consultancy. "You get a few people asking ‘oh, why are you doing it? You've got good jobs and you're paid reasonably well'. [But] if you are doing what we are trying to do, you have to give up some things to make it happen."

- Bridget Jones

THE QUAKE SURVIVOR

As Carmel Olsen relaxes on a plush red couch in her home perched at the foot of the Cashmere Hills, it's hard to believe her family has spent the last two years on the verge on bankruptcy.

But after those "two years of hell", the Olsens have finally came out on the other side, thanks to a payout from the Earthquake Commission.

Olsen, husband Brett, daughters Kate, 15, and Neve, 13, and sons Noah, 10, and Plum, 7, considered themselves "upper middle-class" before they were financially crippled by the Canterbury earthquakes.

They had their kids young and never considered themselves well off, but as Brett settled into a career as a software engineer and Carmel became a part-time speech therapist, life become much more comfortable. That changed after February 22, when they lost their Burwood home.

They were forced to move four times, including to Timaru, where they spent $225 every week on a temporary home after receiving an accommodation supplement.

"We were nearly financially ruined by the earthquakes, because our house wasn't liveable. Last year we were pretty near bankrupt," Carmel says.

"We received letters from the kids' schools saying they were going to send us to BayCorp (a debt collector) because we hadn't paid their fees, but we didn't have any money to pay them."

Before the earthquake, the couple also had two foster children whom they were forced to give up after it became too difficult to support them.

Their financial fears troubled Carmel so much she sought professional help to sleep at night: "You wake up in the middle of the night and wonder how you're going to pay for things and if you're ever going to get out."

It wasn't until this year when they received a payout for their house and land that life began to get back on track.

The family have since bought a new house in Cashmere, and a scholarship has covered half of Kate and Neve's fees to the prestigious Rangi Ruru Girls' School.

"Before the earthquake we had a financial plan with what we wanted for the kids, what house we wanted, where we wanted to live . . . now we've bought a house that's okay, but we can't afford to buy one that's better than okay," says Carmel.

"Sending the girls to a good school is more important than living in a big house, and being middle class you have to make that decision."

The family is now at a point where they can "make choices" with their money again.

"Last year a neighbour came across with a gift voucher so I could buy presents for the kids. This year life's looking good. It's going to be a good Christmas this year."